Guillermo Yeatts documents in this book an economic tragedy that took place within his beloved South American country. Few riches in the industrial world match the natural resource of hydrocarbons. Yet the fair share of oil and gas found in Argentina has been kept undiscovered and underutilized for over a century, desspite the efforts of some of that nation's most entrepreneurial citizens.

The lost opportunity was there for all to see. To the north, in the United States, first in Pennsylvania, and later in Texas, California, and other states, a large industry developed, creating bountiful private wealth and philanthropy that has remained to this day. Had the United States reserved minerals to the government and Argentina allowed private ownership, a reversal of fortunes would have ocurred. Leonardo Villa might have been the industry pioneer in the textbooks and ``Colonel`` E. L. Drake an unknown to history.

Argentina would have been an oil exporter and the U.S. an oil importer in the late nineteenth and first half of the twentieth centuries.

History of a Phantom Industry\r\nYeatts\' story begins with early evidence of oil seepage and commercialization activity in Argentina, at about the same time as in the United States. But while one country raced to development, the other stagnated. The Spanish legal tradition, steeped in government ownership and control that excluded the many to privilege a few, stood in the way. The Constitution of 1853 attempted to incorporate the English tradition of private ownership based on common law, but this promise was soon lost in its interpretation by Argentina's legislators and judiciary. The Mining Code of 1886 retained public ownership of the subsurface.

This poisoned beginning put Argentina in a negative spiral of regulation and underdevelopment. Subsurface ownership by the state required regulation of private development, which introduced political risks to impede commercialization. Government ownership also discouraged private capital since even valuable discoveries did not create a bankable asset. From the landowners' viewpoint, mineral development was not an opportunity but a nuisance of involuntary usage of their surface area.

With inadequate petroleum production, Argentine authorities restricted exports, controlled inventory, set aside proven oil lands for government usage, established purchaser requirements, and set prices. Imported supply, mainly from the United States, was the escape valve, but it underscored who was really benefiting from Argentina\'s oil policy.

With private development discouraged, the government increasingly assumed the commercialization function. With this came mismanagement, outright corruption, and inefficient labor practices pursuing a variety of social purposes. Intervention in the oil sector sometimes spilled over into the general economy. Oil product tariffs that created monopoly profits for the West India Oil Company, for example, became a reason to enact antitrust laws.

Foreign capital and know-how from the United States was another escape valve for the lack of internal infrastructure from government malincentives. Yet, it was never enough, and Argentina\'s tightly regulated oil sector predictably led to antagonism against foreign investment. Such nationalism culminated in the establishment of a state oil company in 1922- Yacimientos Petrolíferos Fiscales (YPF). With complete political control, authorities could earmark indigenous supply for other government entities such as the Navy and the railroads.

The failure of the oil policy was part of an economy-wide public policy failure under Perón's five-year central plans and later administrations. The total economic collapse of mid-1989 had the salutary effect of economic liberalization, greater fiscal restraint and internationalism, but one notable reform remained-privatization of the subsurface.

General Lessons

The insights of this book go beyond one country\'s plight with one particularly important industry. Yeatts\' findings about government ownership apply to any country and any industry:

1) The institution of government ownership does not result from ``market failure`` but is an arbitrary act of political power.

2) The economic distortions created by government ownership cannot be undone by subsequent government involvement but only made worse.

3) The solution for political mismanagement must address the root cause, government ownership, not only the cumulative effects of it.

To the above can be added a general economic maxim: public resources are really private, owned ,and exploited by a political elite, while private resources are really public, owned and managed by a multitude. Government-owned resources do not ``belong to all of the people! and allow ``self-determination``; they belong to none or very few. Nor can private development of mineral resources be slandered as ``exploitative.`` By leaving the mineral wealth unexploited, the people were exploited-not only would-be developers and royalty owners, but all the ancillary businesses constituting an energy infrastructure.

A New Path

What should Argentina do at this late but opportune date? Yeatts provides the answer-implement private ownership of the subsurface and allow market processes to take over from there.

There are few strokes of the pen that can unleash as much spontaneous entrepreneurship, attract as much capital, and generate as much wealth as denationalizing the subsurface.

Yeatts' privatization plan tends toward the ``rule of capture,`` a property-rights assignment that for decades propelled the U.S. oil and gas industry. While this transformation is a welcome and distinct advantage over the status quo, Argentina can also consider an alternative private property-rights assignment-a homestead system where the discoverer(s) of each contiguous reservoir can claim ownership of the entire deposit. But under either assignment, the institution of private property promises to democratize a hitherto elitist industry, making Yeatts a public-policy hero and many of his fellow countrymen and countrywomen beneficiaries in the process.

In 1998, this book received the Sir Antony Fisher Memorial Award by Atlas Economic Research Foundation, Fairfax, Virginia, EEUU."